0000883902-19-000061.txt : 20191106 0000883902-19-000061.hdr.sgml : 20191106 20191106084905 ACCESSION NUMBER: 0000883902-19-000061 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 85 CONFORMED PERIOD OF REPORT: 20190928 FILED AS OF DATE: 20191106 DATE AS OF CHANGE: 20191106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Cornerstone Building Brands, Inc. CENTRAL INDEX KEY: 0000883902 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 760127701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14315 FILM NUMBER: 191195208 BUSINESS ADDRESS: STREET 1: 5020 WESTON PARKWAY STREET 2: SUITE 400 CITY: CARY STATE: NC ZIP: 27513 BUSINESS PHONE: (888) 975-9436 MAIL ADDRESS: STREET 1: 5020 WESTON PARKWAY STREET 2: SUITE 400 CITY: CARY STATE: NC ZIP: 27513 FORMER COMPANY: FORMER CONFORMED NAME: NCI BUILDING SYSTEMS INC DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL COMPONENTS INCORPORATED DATE OF NAME CHANGE: 19600201 10-Q 1 cnr-20190928.htm 10-Q Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to    
 
Commission file number: 1-14315
 
 cnr-20190928_g1.jpg
Cornerstone Building Brands, Inc.
(Exact name of registrant as specified in its charter)

 
Delaware76-0127701
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

5020 Weston ParkwaySuite 400CaryNC27513
(Address of principal executive offices)(Zip Code)
 
(888) 975-9436
(Registrant’s telephone number, including area code)

 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerýAccelerated filer
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ý No
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock $0.01 par value per shareCNRNew York Stock Exchange

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, $0.01 par value - 125,566,409 shares as of October 31, 2019.





TABLE OF CONTENTS 
  PAGE
  
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
   
  
Item 1.
Item 1A.
Item 2.
Item 6.
 

i


PART I — FINANCIAL INFORMATION 
Item 1.  Unaudited Consolidated Financial Statements. 
CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months EndedNine Months Ended
 September 28,
2019
July 29,
2018
September 28,
2019
July 29,
2018
Sales$1,285,043  $548,525  $3,645,332  $1,426,943  
Cost of sales
975,240  415,124  2,844,949  1,097,542  
Gross profit309,803  133,401  800,383  329,401  
Selling, general and administrative expenses154,034  79,039  466,368  228,231  
Intangible asset amortization44,725  2,412  132,699  7,237  
Restructuring and impairment charges, net4,984  (439) 15,522  1,143  
Strategic development and acquisition related costs10,500  3,642  36,668  5,503  
Loss (gain) on disposition of business  (1,013)   5,673  
Gain on insurance recovery  (4,741)   (4,741) 
Income from operations95,560  54,501  149,126  86,355  
Interest income155  48  491  118  
Interest expense(56,549) (4,572) (173,134) (16,913) 
Foreign exchange gain (loss)(616) (258) 1,084  (92) 
Loss on extinguishment of debt      (21,875) 
Other income, net717  345  665  1,072  
Income (loss) before income taxes39,267  50,064  (21,768) 48,665  
Provision (benefit) for income taxes14,103  14,078  (4,448) 13,114  
Net income (loss)25,164  35,986  (17,320) 35,551  
Net income allocated to participating securities(374) (221)   (248) 
Net income (loss) applicable to common shares$24,790  $35,765  $(17,320) $35,303  
Income (loss) per common share:  
Basic$0.20  $0.54  $(0.14) $0.53  
Diluted$0.20  $0.54  $(0.14) $0.53  
Weighted average number of common shares outstanding:  
Basic125,557  66,335  125,526  66,361  
Diluted125,558  66,438  125,526  66,477  
See accompanying notes to consolidated financial statements.
 


1


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 Three Months EndedNine Months Ended
 September 28,
2019
July 29,
2018
September 28,
2019
July 29,
2018
Comprehensive income (loss):    
Net income (loss)$25,164  $35,986  $(17,320) $35,551  
Other comprehensive loss, net of tax:    
Foreign exchange translation gains (losses)(1,862) (68) 4,278  (92) 
Unrealized loss on derivative instruments(6,858)   (29,604)   
Other comprehensive loss(8,720) (68) (25,326) (92) 
Comprehensive income (loss)$16,444  $35,918  $(42,646) $35,459  
See accompanying notes to consolidated financial statements.
2


CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 September 28,
2019
October 28,
2018
ASSETS  
Current assets:  
Cash and cash equivalents$105,244  $54,272  
Restricted cash3,872  245  
Accounts receivable, less allowances of $9,948 and $6,249, respectively
594,681  233,297  
Inventories, net467,916  254,531  
Income taxes receivable27,641  1,012  
Investments in debt and equity securities, at market3,569  5,285  
Prepaid expenses and other74,882  34,821  
Assets held for sale5,018  7,272  
Total current assets1,282,823  590,735  
Property, plant and equipment, less accumulated depreciation of $530,490 and $459,931, respectively
643,844  236,240  
Lease right-of-use assets308,256  —  
Goodwill1,677,929  148,291  
Intangible assets, net1,784,937  127,529  
Deferred income taxes  982  
Other assets, net10,667  6,598  
Total assets$5,708,456  $1,110,375  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$25,600  $4,150  
Note payable  497  
Payable pursuant to a tax receivable agreement24,760    
Accounts payable235,247  170,663  
Accrued compensation and benefits84,951  65,136  
Accrued interest31,996  1,684  
Accrued income taxes18,137  11,685  
Current portion of lease liabilities68,993  —  
Other accrued expenses254,833  81,884  
Total current liabilities744,517  335,699  
Long-term debt3,267,646  403,076  
Deferred income taxes244,062  2,250  
Long-term lease liabilities243,624  —  
Other long-term liabilities280,722  39,085  
Total long-term liabilities4,036,054  444,411  
Stockholders’ equity:  
Common stock, $0.01 par value; 200,000,000, 125,621,510 and 125,566,409 shares authorized, issued and outstanding at September 28, 2019, respectively; and 100,000,000, 66,264,654 and 66,203,841 shares authorized, issued and outstanding at October 28, 2018, respectively
1,257  663  
Additional paid-in capital1,247,026  523,788  
Accumulated deficit(283,159) (186,291) 
Accumulated other comprehensive loss, net(36,139) (6,708) 
Treasury stock, at cost (55,101 and 60,813 shares at September 28, 2019 and October 28, 2018, respectively)
(1,100) (1,187) 
Total stockholders’ equity927,885  330,265  
Total liabilities and stockholders’ equity$5,708,456  $1,110,375  
See accompanying notes to consolidated financial statements.

3


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 September 28,
2019
July 29,
2018
Cash flows from operating activities:  
Net income (loss)$(17,320) $35,551  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation and amortization191,485  30,974  
Non-cash interest expense6,233  1,140  
Loss on extinguishment of debt  21,875  
Share-based compensation expense10,613  8,909  
Loss on disposition of business, net  5,092  
Gain on insurance recovery  (4,741) 
Non-cash fair value premium on purchased inventory16,249    
Gains on asset sales, net (335) (875) 
Provision for doubtful accounts(492) (177) 
Deferred income taxes(45,192) (1,676) 
Changes in operating assets and liabilities, net of effect of acquisitions:  
Accounts receivable(138,329) (13,512) 
Inventories63,327  (64,882) 
Income taxes1,256  2,446  
Prepaid expenses and other(4,374) (3,686) 
Accounts payable8,486  34,567  
Accrued expenses(21,005) 6,088  
Other, net(2,783) (185) 
Net cash provided by operating activities67,819  56,908  
Cash flows from investing activities:  
Acquisitions, net of cash acquired(179,184)   
Capital expenditures(86,364) (34,867) 
Proceeds from sale of property, plant and equipment873  6,338  
Business disposition, net  (1,426) 
Proceeds from insurance  4,741  
Net cash used in investing activities(264,675) (25,214) 
Cash flows from financing activities:  
Proceeds from stock options exercised  1,279  
Proceeds from ABL facility290,000  85,000  
Payments on ABL facility(120,000) (85,000) 
Proceeds from term loan  415,000  
Payments on term loan(12,810) (145,184) 
Payments on senior notes  (265,470) 
Payments on note payable  (1,245) 
Payments of financing costs  (6,521) 
Payments related to tax withholding for share-based compensation(231) (5,048) 
Purchases of treasury stock  (46,705) 
Net cash provided by (used in) financing activities156,959  (53,894) 
Effect of exchange rate changes on cash and cash equivalents1,406  (92) 
Net decrease in cash, cash equivalents and restricted cash(38,491) (22,292) 
Cash, cash equivalents and restricted cash at beginning of period147,607  65,794  
Cash, cash equivalents and restricted cash at end of period$109,116  $43,502  
 
See accompanying notes to consolidated financial statements.

4


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Fiscal Quarters and Transition PeriodCommon StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Treasury StockStockholders’ Equity
 SharesAmountSharesAmount
Balance, June 29, 2019125,588,427  $1,256  $1,243,897  $(308,323) $(27,419) (69,315) $(1,207) $908,204  
Treasury stock purchases—  —  —  —  —  (12,612) (64) (64) 
Retirement of treasury shares(26,826) —  (171) —  —  26,826  171  —  
Issuance of restricted stock46,178  1  (1) —  —  —  —  —  
Issuance of common stock for the Ply Gem merger13,731  —  167  —  —  —  —  167  
Other comprehensive loss—  —  —  —  (8,720) —  —  (8,720) 
Share-based compensation—  —  3,134  —  —  —  —  3,134  
Net income—  —  —  25,164  —  —  —  25,164  
Balance, September 28, 2019125,621,510  $1,257  $1,247,026  $(283,159) $(36,139) (55,101) $(1,100) $927,885  
Transition Period Beginning Balance, October 28, 201866,264,654  $663  $523,788  $(186,291) $(6,708) (60,813) $(1,187) $330,265  
Treasury stock purchases—  —  —  —  —  (347,040) (4,128) (4,128) 
Retirement of treasury shares(296,954) (3) (3,634) —  —  296,954  3,637  —  
Issuance of restricted stock977,226  10  (10) —  —  —  —  —  
Issuance of common stock for the Ply Gem merger58,638,233  586  712,455  —  —  —  —  713,041  
Other comprehensive loss—  —  —  —  (4,105) —  —  (4,105) 
Share-based compensation—  —  4,457  —  —  —  —  4,457  
Cumulative effect of accounting change—  —  —  (3,358) —  —  —  (3,358) 
Net loss—  —  —  (76,190) —  —  —  (76,190) 
Transition Period Ending Balance, December 31, 2018125,583,159  $1,256  $1,237,056  $(265,839) $(10,813) (110,899) $(1,678) $959,982  
Balance, April 29, 201866,252,112  $663  $521,190  $(249,832) $(7,555) (109,793) $(2,142) $262,324  
Treasury stock purchases—  —  —  —  —  (21,940) (436) (436) 
Retirement of treasury shares(22,044) —  (457) —  —  22,044  457  —  
Issuance of restricted stock12,657  —  —  —  —  —  —  —  
Stock options exercised21,788  —  239  —  —  —  —  239  
Other comprehensive loss—  —  —  —  (68) —  —  (68) 
Deferred compensation obligation—  —  (954) —  —  48,876  954    
Share-based compensation—  —  1,041  —  —  —  —  1,041  
Net income—  —  —  35,986  —  —  —  35,986  
Balance, July 29, 201866,264,513  $663  $521,059  $(213,846) $(7,623) (60,813) $(1,167) $299,086  
5


See accompanying notes to consolidated financial statements.
CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In thousands, except share data)
(Unaudited)
Fiscal Year to Date PeriodsCommon StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Treasury StockStockholders’ Equity
 SharesAmountSharesAmount
December 31, 2018125,583,159  $1,256  $1,237,056  $(265,839) $(10,813) (110,899) $(1,678) $959,982  
Treasury stock purchases—  —  —  —  —  (34,724) (231) (231) 
Retirement of treasury shares(84,810) (1) (722) —  —  84,810  723  —  
Issuance of restricted stock109,430  2  (2) —  —  —  —  —  
Issuance of common stock for the Ply Gem merger13,731  —  167  —  —  —  —  167  
Other comprehensive loss—  —  —  —  (25,326) —  —  (25,326) 
Deferred compensation obligation—  —  (86) —  —  5,712